As a result of issues identified by their staff and the Transition Resource Group, which was established to inform them about adoption issues, the FASB agreed to a proposal to delay the adoption of their recently issued revenue recognition guidance.
If passed as proposed, the Board would allow companies an additional year to adopt the relatively complex and judgement based accounting standard.
According to an article by Ken Tysiac, an editorial director for the Journal of Accountancy, the FASB staff identified the following preparer concerns regarding adoption of the standard:
- A lack of resolution in the accounting issues that the boards are considering changing.
- A lack of available IT solutions for the new standard. Board members suggested that IT vendors are waiting for the clarifying changes to be resolved before developing software.
- Logistical issues caused by the requirement to review contracts with customers that may number in the millions and may have duration of 10 years or more.
- The need to design and implement new internal controls and to educate personnel throughout the organization.
As currently proposed, the FASB would allow public entities to adopt the revenue recognition guidance for annual reporting periods beginning after December 15, 2017. For interim reporting periods, public entities would be required to adopt the standard within the first interim period within the year of adoption.
According to an FASB news release about the proposal, private entities would be required to adopt the standard for annual reporting periods beginning after December 15, 2018. However, for interim reporting purposes, private entities would be required to adopt the revenue recognition standard in “interim reporting periods within annual reporting periods beginning after December 15, 2019 (that is, a nonpublic organization would not be required to apply the new revenue standard in interim periods within the year of adoption).”
The proposal permits early application of the revenue recognition standard, however, early application can not begin before of financial reporting periods beginning after December 15, 2016, which was the original public entities required implementation date stated in the revenue recognition standard .
The FASB anticipates issuing its proposal later in the 2nd quarter of 2015. They expect that the proposal will have a 30 day exposure period which allows constituent comments on their proposed guidance.